The Reserve Bank of India (RBI) has released the Monetary Policy Report for the month of April 2021.

Monetary Policy Report: RBI

  • Unchanged Policy Rates:
    • Repo Rate – 4%.
    • Reverse Repo Rate – 3.35%.
    • Marginal Standing Facility (MSF) – 4.25%.
    • Bank Rate- 4.25%.
  • GDP Projection:
    • Real Gross Domestic Product (GDP) growth for 2021-22 has been retained at 10.5%.
  • Inflation:
    • RBI has revised the projection for Consumer Price Index (CPI) inflation to:
      • 5.0% in Quarter 4 of 2020-21.
      • 5.2% in Quarter 1 of 2021-22.
      • 5.2% in Quarter 2 of 2021-22.
      • 4.4% in Quarter 3 of 2021-22.
      • 5.1% in Quarter 4 of 2021-22.
  • Accommodative Stance:
    • The RBI decided to continue with the accommodative stance as long as necessary to sustain growth on a durable basis and continue to mitigate the impact of Covid-19 on the economy, while ensuring that inflation remains within the target going forward.
      • An accommodative stance means a central bank will cut rates to inject money into the financial system whenever needed.
  • Support to Financial Institutions:
    • RBI would extend fresh support of Rs. 50,000 crore to the All India Financial Institutions for new lending in Financial Year (FY) 2021-22.

      • National Bank for Agriculture and Rural Development (NABARD) will be provided a Special Liquidity Facility (SLF) of Rs. 25,000 crore for one year to support agriculture and allied activities, the rural non-farm sector and Non-Banking Financial Companies (NBFCs) – Micro-Finance Institutions (MFIs).
      • An SLF of Rs. 10,000 crore will be extended to the National Housing Bank for one year to support the housing sector.
      • Small Industries Development Bank of India (SIDBI) will be provided Rs.15,000 crore under this facility for up to one year for funding of Micro, Small and Medium enterprises (MSMEs).
    • All three facilities will be available at the prevailing policy repo rate.
  • Review Committee for ARC’s:
    • Signalling the importance of Asset Reconstruction Companies (ARCs) to deal with bad loans, the RBI would constitute a committee to undertake a comprehensive review of the working of ARCs in the financial sector ecosystem.
    • The committee will recommend suitable measures for enabling such entities to meet the growing requirements of the financial sector.
  • Extension of Priority Sector Lending:
    • A six-month extension to September 30,2021 for Priority Sector Lending (PSL) classification for lending by banks to NBFCs for ‘on-lending’ to sectors that contribute significantly to the economy in terms of export and employment — has been approved.
      • On-lending means to lend (borrowed money) to a third party.
    • This would provide an impetus to NBFCs providing credit at the bottom of the pyramid.

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